US Dollar settles around 95 handle after US data-led fall

The US Dollar Index, which tracks the greenback against a basket of six trade-weighted peers, plummeted to its lowest level since late September at 94.97 in the early NA session and went into a consolidation phase. The index has been spending the last hour in a tight range around the 95 mark, where it's losing 0.6% on the day.

The heavy sell-off witnessed earlier was triggered after the data from the U.S. revealed that the CPI growth on a yearly basis fell to 1.6% in June from 1.9% in May, contradicting Fed Chairwoman Yellen's statement about the slow-down seen in inflation being temporary. Moreover, retail sales, which is a good gauge of consumer spending, contracted by 0.2% on a monthly basis in June. In the meantime, Dallas Fed President Robert Kaplan crossed the wires during the session, arguing that the inflation has been muted and he would like to see more progress before raising U.S. interest rates further.

• US: CPI and retail sales data casts doubt on Fed rate hiking strategy - ING
• Fed's Kaplan: Free and open trade is in the U.S. interest

Later in the day, other data from the U.S. helped the greenback find support as the industrial production beat the market consensus by advancing 0.4%. 

• US: Industrial production rose 0.4% in June for its fifth consecutive monthly increase

After making a modest recovery in the previous week, the US Dollar Index is headed for a weekly close with losses for the fourth time in last five weeks. In fact, if the index remains around the 95 mark at the end of the session, it will record its lowest weekly close in more than ten months.

Technical outlook

94.45 (Sept. 8, 2016, low) could be seen as the first technical support ahead of 94 (psychological level) and 93.05 (Jun. 23, 2016, low). On the upside, 95.50/60 (weekly resistance band) is the initial hurdle followed by 96 (psychological level) and 96.35 (Jun. 28 high).